Index Finds Homeowner Exuberance for Remodeling

by Houston Agent

An index charting home remodeling activity is soaring, especially year-over-year.

The Residential Remodeling Index, which is compiled monthly by Austin, Tx.-based BuildFax, rose in July for the 21st straight month, an indication that homeowners are opting to renovate their current homes rather than buy new properties – and with considerable zeal.

According to BuildFax, the index rose by 0.9 (about 0.6 percent) from June to July, and the index is 24 percent higher than in July 2010. They are the highest numbers since BuildFax created the index in 2004, even counting the home equity boom from 2004 to 2006.

Joe Emison, the vice president of research and development at BuildFax, said the tough housing market has added to the appeal of remodeling.

“As millions of Americans believe that they will not be able to secure a new home due to a variety of factors including tight credit, limited buyers and challenging job prospects, they are more and more turning to renovating and remodeling their current properties, sending remodeling activity to record levels,” Emison said.

Though remodeling projects seem like an alternate to home sales, as the National Association of Realtors has reported, different remodeling projects provide different returns on investments. Among the most useful were deck additions, kitchen remodeling, basement remodeling and two-story additions, all of which retained more than 65 percent of their investment in the home’s value. Remodeling magazine, an entire publication devoted to the remodeling businesses, has an even broader collection of stats, but one fact should be clear – remodeling is not a bad facet of real estate, especially if the right remodeling projects are applied.

BuildFax also included regional data, and though the South did see monthly declines, it did increase year-over-year totals. For monthly, the South gained 3.3 points, or 3 percent, which was a decline from June; yearly totals were more positive, with gains of 6.2 points, or 7 percent.

Calculated Risk does point out two valuable caveats of the index, though. First, the index follows remodeling activity, not the total money being spent on remodeling projects; so though volume may be higher, investment could still be flat. And second, remodeling goes through seasonal phases, as the site demonstrates with this chart.

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